Friends posts pleasing profits

Thursday 5 August 2004 16:21 BST

UK LIFE insurer Friends Provident reported a better-than-expected 25% increase in first-half operating profit on and said it was optimistic of increasing market share.

The smallest of the UK's blue-chip life insurers said operating profit rose to £169m, largely due to increased sales of investment and protection products such as income protection policies sold with mortgages.

A Reuters poll of 10 analysts had given a median forecast of £147m, with a range of £135m to £158m.

New sales of life and pension products rose 7% to £212m and Friends said it was optimistic for the second half, but cautioned that the volatile situation in Iraq was likely to continue to weigh on the international and UK savings markets.

'We are still not seeing them return for large volumes of equity products.'

Friends is the last of the large UK life insurers to report earnings. Its outlook and sales performance chimed with rivals Prudential and Legal & General, although Aviva, the UK's largest insurer, struck a more cautious note on growth prospects for the UK market.

'I think all the life insurers' results have been better than expected but people have been sceptical about this market and the results have not been enough to shoot the lights out,' said Marcus Barnard, analyst at HSBC.

'Friends' results were encouraging. The strong sales of term assurance and protection products is good. Without the closure of the direct sales force, sales would have been up around 10%,' said Barnard, who has a 'buy' recommendation on the stock.